Wednesday, January 11, 2012

Nowhere is the continual stupidity of Hollywood more visible than in the LAT's section "the Big Picture" by Patrick Goldstein. Goldstein swallows whole the lunacy that Hollywood is following: trying to make money by producing (mostly) American financed/starring movies designed to appeal to foreign audiences. This is self-evidently stupid policy, because "explosive growth" audiences don't have money, don't respect intellectual property (piracy), don't pay for films, and don't really like "American" content much. Meanwhile it is pretty easy for locals to create their own content.

Hollywood is betting it all on stupid, because they simply cannot make movies that appeal to American audiences. Hollywood can't make films that Americans feel like paying for to see in a theater, so the fantasy of magical thinking is that the studios can make movies for foreigners who will lap up anything and everything.

To see how stupid this is, just look at China. China is filled with film piracy, and just recently the ban on "Westernized" entertainment on TV and movies pulled many programs and films off the air or theaters.

When Chinese leader Hu Jintao recently warned his nation's ruling Communist Party of an imminent risk from the West, he wasn't talking about the United States boosting its military capabilities in East Asia. He was alluding to things such as video games."International hostile forces" use thought and culture "to Westernize and split" China, Hu stated in a speech publicized in January in the party magazine Seeking Truth..At least China's embattled youth can strike back at the West come May when Glorious Mission, a civilian version of the Chinese army's first training simulation game, goes on sale, according to the state-run China Daily newspaper. Co-developed by the People's Liberation Army, the online, first-person shooter game allows players to destroy enemies that resemble U.S. forces.Glorious Mission and other "serious games" supported by Chinese authorities form one front in Beijing's multi-headed cultural offensive, launched last fall. There's been fighting talk from Hu's likely successor, Xi Jinping.China's universities are "a key ideological front to equip our youth with the core values of socialism," he told the country's deans last week . Xi, 58, is likely to succeed Hu, 69, as party general secretary this year.Through massive investment, and countless censors, the Communist Party aims to boost China's "soft power," or cultural influence, abroad and shore up "cultural security" at home by reinforcing state control of the sector and guiding audiences back to "socialist core values." Neither goal will come easily....State censors launch regular crackdowns, sometimes with bizarre targets: Last year, authorities restricted time-travel TV dramas and banned downloading of certain foreign pop songs, including The Backstreet Boys' seemingly non-political 1999 hit I Want It That Way.In recent weeks, the government has stripped two-thirds of entertainment programs, mostly talent, talk and dating shows, from the schedules of China's popular satellite stations. Citing "excessive entertainment and a trend toward low taste," regulators have forced satellite channels to switch to programs promoting "traditional virtues and socialist core values," the state-run Xinhua News Agency reported.

I don't know about you. But my money is on China exerting more control over entertainment, and basically banning Western stuff out of Hollywood in favor of their own domestic stuff. What does it take to make movies in China? Not much. China does not care about Hollywood, they don't make money off Kung Fu Panda, so guaranteed they'll close that down, dole out their own movie-making patronage, and be happy to run off pirated copies of Kung Fu Panda 10 like hotcakes.

South Korea, Russia, and Brazil all have their own burgeoning film industry, which will assuredly demand protection from Hollywood. Eager to win patronage and screw over foreigners, local leaders will happily oblige. Already foreign film distributors are taking baths, many exiting, because it is hard to make money distributing Hollywood films. So much piracy, so much theft, so many theaters not paying the full amount of admissions they are supposed to pay. After all, law in most of these places doesn't exist. Unless the distributor has paid off the government and has enough juice to get guys with guns to visit the offices of the distributors, reality is that they will get only what the exhibitor feels like paying.

Goldstein swallows whole the following fantasy:

This focus on foreign markets is clearly changing the way studios assemble their feature film slates. Nowhere is this more evident than at Paramount Pictures, Hollywood's market-share leader in 2011 with 19.2% of the overall business. In 2007, when the studio also had the largest share of the market, Paramount did roughly the same amount of business in the U.S. as it did overseas — $1.5 billion domestic versus $1.6 billion international. In 2011, the studio's films grossed $1.9 billion in the U.S. But they made a whopping $3.2 billion overseas.

If you believe those numbers, let me interest you in an outstanding investment opportunity with John Corzine and MF Global, in European bonds. Does anyone think Paramount ACTUALLY did that amount of business overseas. Or is that just a number "booked" from a distributor, of which they will get something like 30-40%?

Hollywood studios want people to believe (they are called suckers er investors) that they have some magic formula. Don't worry, they say, even though AMERICANS have decided that "the Hangover 2" or "New Year's Eve" can wait till next year as a Redbox or Netflix rental, or streaming, foreigners are stupid, moronic gits who can't tie their own shoes, and will reliably stream into movie houses at full price. Like poor people in India, China, Pakistan, Brazil, and Russia (that's most of the population) will be paying $15 a person (in their local currencies equivalent) to see "Mission Impossible 7" or "Xenu's Revenge" or what have you.

This situation seems to echo the late 1960's and early 70's, when Hollywood could only get people into to see movies like "Towering Inferno" or "Earthquake" or "the Sting" until Star Wars and Jaws came along, and showed how to make movies everyone would enjoy.

Movies are still a MASS medium. To make money off them, lots of people need to enjoy them and pay top dollar to see them. Crummy movies aimed at small slices like tweens or hipsters will never be cheap enough, NEVER to cover Hollywood's fixed costs. Very rapidly now, Hollywood will start to fail. Like GM at the end, there is not enough real payoff to fund their capital needs.

Hollywood's model, like that of Blue States, is one that is self-destructive. As long as there was money being made selling off library/catalog on DVDs, and good times had customers buying, Hollywood could afford the reality that most of their current movies sucked, and badly at that. With little popularity and their few blockbusters requiring hideous amounts of capital, with many failing. Rather than go back to the drawing board, and make movies everyone could enjoy, Hollywood doubled down on stupidity and arrogance, figuring foreigners will bail them out.

Matthew Yglesias on Slate boasts that Hollywood still has more cultural reach than China, while Business Insider notes:

"A recently implemented rule has effectively curbed the ‘excessive entertainment’ trend as two-thirds of the entertainment programs on China's 34 satellite channels have been cut, according to the country's top broadcasting watchdog. ‘The total number of entertainment shows airing during primetime every week has been reduced to 38 from 126 at the end of 2011, marking a 69 percent plunge as the new rule came into effect on Jan. 1,’ said a statement issued Tuesday (3 January) by the State Administration of Radio, Film and Television (SARFT)."According to an SARFT directive last October, each of the country's satellite channels would be limited to broadcasting two entertainment programs each week and a maximum of 90 minutes of content defined as entertainment every day during primetime -- 7:30 p.m. to 10 p.m. The directive also required channels to broadcast at least two hours of news programming. Between 6 p.m. and 11:30 p.m., they must each broadcast at least two 30-minute news programs."The restricted programs on the SARFT list include dating shows, talent contests, talk shows as well as emotional stories that were deemed 'excessive entertainment' and of 'low taste.' However, popular dating shows like ‘If You Are the One,’ produced by Jiangsu Satellite TV, and soap operas, such as ‘Li Yuan Chun,’ presented by Henan Satellite TV, will still be aired during weekend primetime hours, according to the statement."It said that the satellite channels have started to broadcast programs that promote traditional virtues and socialist core values. The newly-added programs among the satellites' revised broadcasting schedules are documentaries as well as cultural and educational programs, it added. The SARFT believes that the move to cut entertainment programming is crucial in improving cultural services for the public by offering high quality programming."

This is one area where the rise of the Chinese manufacturing juggernaut hasn't impaired America's leading role at all. If anything, the reverse as a more prosperous China serves as an increasingly lucrative market for American firms. But Chinese President Hu Jintao is none too happy about it, kicking off the New Year with a magazine article complaining that "[i]nternational forces are trying to Westernize and divide us by using ideology and culture."The talk coincides with the implementation of a regulation announced in October that aims to clean up Chinese television by restricting networks to offering no more than two "overly entertaining and vulgar" programs per week. That kind of strategy strikes me as unlikely to succeed, but I would welcome more robust efforts by the PRC to strengthen the quantity of cultural outputs that are up to international standards. I really enjoyed Red Cliff, for example, but we just don't see that many Chinese war epics.

PC makes you stupid. And stupidity kills. Even, eventually in Hollywood.

I believe none other than that great philosopher Charlie Sheen called it "Winning."

Related on this topic, apparently Nigeria has a huge developing film industry. Nigerian films may currently outsell Hollywood across Sub-Saharan Africa. Though the business model is drastically different. Nollywood doesn't first release in high priced movies, then sell high-priced DVDs for years before discounting.

They sell dirt-cheap DVDs upon release to compete with pirates. It helps that the films are several orders of magnitude cheaper than Hollywood films.

http://en.wikipedia.org/wiki/Nollywood

I think at it's core that even if the movies are lower quality, people prefer to watch movies about people that look, talk, act and think like them. If I had to guess one studio that would come out king I'd say Pixar.

They can keep churning out movies about anthropomorphic [blank]. A talking car or robot can just as easily be imagined to be a white Canadian, Korean, Andean highlander or Papuan. Voice it with local actors, so no annoying sub-titles or dubs. You can change the lines or even release differently cut versions to account for "regional cultural sensitivities."

Best part is piracy isn't even that big an issue for Pixar since they make most of their money on the merchandising anyway.

The alternative model I can see for Hollywood would be something like George Lucas did with all the special effects investment he used to make Star Wars. Okay, let's accept that we're going to lose to foreign studios and distributors. We still have billions invested in equipment and talent.

Let the foreigners make the movie, then lease out special effects, filming equipment, writing and directing talent, even sound stages (no reason you can't fly Indian actors to LA to film a few demanding scenes). All this capital investment that people aren't willing to make in a third world industry.

Kaz -- Piracy means the studios see nothing. The fairly loathsome director of those Hostel movies, Eli Roth, reacted in disgust when his torture-porn movies were sold outside his Mexico City hotel room for 25 cents US equivalent.

All the product placement in the world won't pay for that lost revenue stream. And most movies are not toy sellers (which themselves are pirated and sold outside and inside the US by the very Chinese toy factories that make them).

Hollywood likes to think of itself as a shark, it is more like a big bass fish in a protected pond.

Where claimed numbers of piracy are equated to lost sales. It's absolutely ridiculous to assume that if easy piracy didn't exist, Eastern Europeans would shell out 20 bucks for the latest hollywood bs.

Also, if we went by the numbers the RIAA claims when it comes to piracy, they apparently deserve more money than exists in the entire world. --On other note:

New services like Netflix/itunes capitalize on the cheap infrastructure to move goods that we have today. The music industry has full on moved to the digital sphere by now, and their profits have never been bigger, at the same time the barriers for new musicians to enter the market have become nearly nonexistent.

The movie industry has moved on too, and they have seen a growth in their profits, but they REFUSE (music industry still does this to an extent as well) to take in the good with the bad. They reap the benefits of the digital age while refusing to let go of the old ones. --

Regardless, it doesn't matter in the end, we're not going back to those days bygone. This doesn't mean the movie industry or whatever will die, you will always have good people willing to support the things they love. And most importantly, the market will adapt to bring in revenue through methods we have no idea of today.